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Loan Officers Migrating to Smaller Firms

MAR 13, 2013 4:00pm ET
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That giant sucking sound you hear may be the sound of mortgage loan officers from the large national commercial banks moving to small and midsize regional players.

What's driving the trend? As the industry shifts from a refinance-driven market to one emphasizing purchase loans, there's a greater urgency for lenders to close loans when borrowers and their loan officers demand, not when it's convenient for the lender. Smaller firms say they are better able to do that since they don't have far-flung operations around the country that handle one piece of the loan at a time, but instead do everything at a centralized location close to the borrower's intended property.

"People who used to work at small banks and brokers before the meltdown, then went to the big banks as a safe haven, are now coming back to the smaller places for the control and service aspects," says John Walsh, president of Total Mortgage Services in Milford, Conn. "The refi business is going to come to an end and if you're going to do purchase business the service levels are going to have to be there. Closing a purchase loan in 120 days is not going to cut it anymore. Loan officers value their relationships and they're tired of getting burned with horrible turnaround times. The loan officers are going to places that can deliver."

Walsh says his firm can close purchase loans in as little as 15 to 20 days and is planning to come out with a 30-day purchase loan guarantee when customers are pre-approved for a loan from Total. "What's going to win the day is our ability to turn around loans quickly," Walsh says.

"Where the banks fail is they don't meet purchase dates," agrees Paul Anastos, president of Mortgage Master in Walpole, Mass., which has offices in 10 states and is licensed in 25. "Big banks have big mentalities. They don't worry about individual customers. We worry more about every single individual loan than I think a big bank does. We're a lot more emotionally and financially invested in each individual transaction than maybe a big bank is. If you need to, we can close in 10 days or less. That's just not going to happen at a big bank."

Recently the company had 20 people at a new-employee orientation, which Anastos says was a "pretty good size" recruiting class. It recently opened an office in Chicago to handle the Midwest and is now looking to expand in California.

Willie A. Newman, president of Cole Taylor Mortgage in Ann Arbor, Mich., a unit of Chicago-based Cole Taylor Bank, said he's seen a movement recently of loan officers to companies like his, although he stopped short of calling it a flood. Cole Taylor recently added a group of loan originators in New York from a "very large bank that is very active in the mortgage market" and is talking to another group in a state where the company is currently not licensed.

Newman says the driver has been a change of emphasis at the large banks to centralized offices away from "street" loan officers, especially for refinances.

But Newman says the flow of loan officers is moving not just "downstream" from the big banks to midsize regionals but also "upstream" from smaller banks that don't have access to the secondary market.

Drew Waterhouse, managing director and CEO at Hammerhouse LLC, a mortgage sales recruiting firm in Mission Viejo, Calif., says compensation is often better at smaller firms than it is at the large banks.

"A lot of the very big banks put so much value on their own brand and their LOs get business because of their brands, they pay themselves more and their LOs less," he says. "Compensation at a smaller regional might be 100 to 150 basis points per loan while at a big bank it could be 65 to 100 basis points. That's a significant difference."

But loan officers are looking for more than just compensation, Waterhouse says. They're also asking, "Will the company support me over the long term?"

Specifically, smaller firms are willing to invest more in their loan officers to help them close more loans—and thus make more money—than big banks are. These firms are willing to provide technology solutions, marketing assistance and business planning to help their loan officers close more loans.

"Smaller and regional companies are taking the time to build solutions that will continue to maintain the sustainability of their employees," he says. "They are making sure they are providing a value proposition to their loan officers."

"Most loan officers want to be self-sufficient, so they're going to companies who can help them build, develop and grow their business," Waterhouse says. "That's where we're seeing the advantage happening right now."

George Yacik has been covering the residential mortgage business for more than 20 years and writes frequently for industry publications. He can be reached at gyacik@yahoo.com.

Comments (5)
Service with the same/similar interest rate and costs I would expect would be the selling point for L O's. I don't know why anyone waited 120 days to close a loan, but I know they did. I'm closing loans in as little as 2 weeks with one lender. Now if only the uninformed would stop bashing brokers as the cause of the meltdown, consumers may actually understand choices better.
Posted by | Tuesday, March 19 2013 at 1:44PM ET
As the Branch Manager of a smaller mortgage lender in Florida, I agree with your statements 100%. The larger banks are simply too disconnected from their employees and customers. Originators were willing to overlook that because they were scared about staying on commission in an uncertain market. But now, we are receiving so many referrals and online inquiries because of our reputation as a service-oriented mortgage company that LOs are calling us every day to join up. It's a true turn for the better and the real beneficiaries are the clients.
Posted by | Wednesday, March 20 2013 at 11:09AM ET
I'm thinking of joining a mortgage broker who says we can close loans in as little as 2 weeks because the longer the wait the more that can go wrong,imho.
Posted by Ike I | Sunday, March 24 2013 at 9:44AM ET
Well ive been in the mortgage industry in the ups and downs of the market...I also had a small mortgage company that partnered with a Realty company ..we were going strong during the mortgage boom for six years .before the mortgage meltdown. I look at it this way...big banks that received bad publicity from the foreclosure market...from the mortgage meltdown also were caught for unscupulous avtivities...borrowers are also afraid of being caught up in some bad loan they cannot get out of..and they lost faith in the american dream...of being able to buy a home...and being one of the greatest asset...and value was owning your own home...building equiy and buying another home. The larger banks really dont care about the customer...its bottom line..profit...and they feel the same about Loan officers ...quanity....of loans closed...paying them less comission in a depressed market...and economy they are paid less. Ive always enjoyed working with and for smaller banks..to receive more customer service, faster turn arounds...plus the longest job I had was working for myself, managing my own office and team. I was happier and like the freedom of setting my own financial quotas....which I never received that at any large bank.
Posted by | Thursday, March 28 2013 at 2:58AM ET
Finance is no different than any other industry. Generally, smaller companies are able to be more agile and competitive while their larger counterparts are mired in the politics and costs of layers upon layers of unnecessary operational friction. As the smaller companies grow they will likely find themselves in a similar boat if they're not careful.

Take just one example. A typical large bank with several layers of "Vice Presidents" reporting to each other. These are mostly salaried people who add zero additional value to the sales process and spend most of their day creating and reporting layer upon layer of meaningless metrics...typically to each other. Prodded from the layer above to collect more data as if insufficient data collection is the reason the organization is failing. Meanwhile, front line salespeople--in this case the LOs and Sales Managers--spend a significant portion of their day filling out documentation for those metrics rather than engaging in sales. They spend time trying to convince realtors that the companies sub-50% Close-On-Time track record is nothing to be concerned about. And all of this for far less than 50-60bps.
Posted by | Thursday, September 19 2013 at 8:18AM ET
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